FASB/IASB Insurance Contracts Project


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Featured video: PwC Insurance alert - IASB November 2016 meeting

PwC's Gail Tucker discusses the latest November 2016 IASB meeting where they voted on a number of sweep issues relating to the proposed insurance contracts standard (the ‘draft Standard’ or ‘IFRS 17’).

Since February of 2014, the FASB’s focus on accounting for insurance contracts has been to explore potential targeted improvements to existing U.S. GAAP. The project is divided into two components, short-duration and long-duration insurance contracts.

For short-duration contracts (principally property/casualty and health insurance contracts), the FASB has limited the project to enhancing disclosures. The disclosures adopted by the FASB include annual disaggregated incurred and paid claims development tables that need not exceed 10 years, the incurred but not reported claim liabilities included within the incurred claim development table, claim count and interim as well as year-end roll forwards of claim liabilities.

For long-duration contracts (principally life and annuity contracts), the FASB is focusing on enhancements to both accounting and disclosures. Some of the tentative decisions made include the updating of assumptions used in calculating various insurance liabilities, simplifications to deferred acquisition cost amortization models, and reconsideration of the measurement model for minimum death benefits and income benefits.

The project’s revised objective in 2014 is a dramatic change from the FASB’s former comprehensive joint project with the IASB. The objective of that project, still in process at the IASB, was to develop common, high-quality guidance that would address recognition, measurement, presentation, and disclosure requirements for insurance contracts. Joint deliberations with the IASB from 2008 through 2013 ultimately led to the issuance of exposure drafts by the respective Boards in June 2013; however, the two boards reached different conclusions on several key areas. The FASB’s decision to narrow its focus was in large part due to feedback from U.S. investors and preparers who favored targeted improvements to existing U.S. GAAP in the event that substantial convergence with the IASB’s proposed insurance model became unlikely.

The final standard on short-duration insurance contract disclosures was issued in May 2015 and is effective for year end 2016 financial statements and for interim financial reporting thereafter. For more information on the FASB’s Accounting Standard Update, "Disclosures about Short-Duration Contracts," see PwC’s In depth.

For long-duration insurance contracts, FASB deliberations are expected to continue through the first or second quarter of 2016. To the extent the FASB proposes targeted improvements to existing accounting guidance for long-duration contracts, a formal public comment process would seem likely, but has not yet been formally discussed.

For current information about the FASB’s insurance project focusing on targeted improvements for long-duration contracts, see below for PwC summaries of FASB deliberations.

For current information about the IASB’s comprehensive insurance project, see below for PwC summaries of IASB deliberations.

FASB Insurance Projects: Short Duration Disclosures and Long Duration Targeted Improvements - PwC Summaries of FASB Meetings
FASB Insurance Projects: Short Duration Disclosures and Long Duration Targeted Improvements - PwC Summaries of FASB Meetings

How PwC can help

PwC helps insurers formulate an informed response to the insurance contracts exposure draft and provide management/audit committee a high level assessment of the impact on the business. We provide:

  • Extensive, related experience and expertise and an interdisciplinary approach that results in independent insights that complement your analysis;
  • Prompt analysis of implementation and reporting implications to help you meet deadlines (such as comment period requirements);
  • A better understanding of how changes to insurance contracts accounting fits with overall changes to the risk, finance, and actuarial functions;
  • A practical approach to help you better align actuarial resources with changing business and reporting requirements;
  • A balanced assessment of the investment required to achieve compliance while recognizing uncertainty of timing and scope of required changes.

What insurers should be doing by now

Insurers should assess the impact to their products, systems, and investor reporting in order to respond to the proposals by:

  1. Analyzing potential impacts on and opportunities for the business through additional analysis and or modelling key products;
  2. Considering informed and measured decisions on business planning and strategy as a result of this analysis;
  3. Considering the similarities of proposed changes with other regulatory initiatives such as principles-based reserving and the ability to leverage common processes or enhance the financial reporting infrastructure while implementing these changes;
  4. Developing substantive comments on the proposed changes, including potential alternatives;
  5. Participating in industry groups and training throughout the organization.

Contact us

Matt Adams
US Insurance Assurance Leader
Tel: +1 (646) 471 8688

Denise Cutrone
Assurance partner
Tel: +1 (678) 419 1990

Richard de Haan
US Life Actuarial Leader
Tel: +1 (646) 471 6491

Mary Saslow
Managing Director, National Professional Services Group
Tel: +1 (860) 241 7013

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